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Driver Pay: A New Look at an Old Problem

Truck driver pay is often summed up in just two words: Not enough. But one analyst sums up the situation lately with the words “productivity bonuses” and “sign-on bonuses.”

“Some of the new pay plans — and I am a big fan of these — are finding driver productivity measures and linking them to increased pay,” says Gordon Klemp, founder and president of the National Transportation Institute, which publishes the National Survey of Driver Wages.

Productivity bonuses start drivers at a base rate per mile, but give them the potential to go higher if they have such things as a Transportation Worker Identification Credential, a passport or hazmat endorsement, along with passing roadside inspections, having no log or traffic violations, meeting fuel efficiency goals and other metrics. Klemp says drivers can think of it this way: “If I pull a lever for you, Mr. Carrier, then you are going to pay me more and you are going to make more,” he says. “Theoretically, there is no end to it. As long as we can find things drivers can do that provide a better margin and better income for the carrier, they can share in it.”

The other big trend emerging with driver pay, he says, is sign-on bonuses. “The past 24 months we have seen it go from about 12% of carriers to about 47%,” Klemp says.

These bonuses can range from a few hundred bucks to $ 15,000 for team drivers with very specialized qualifications, but Klemp thinks they are a bad strategy.

“They encourage people to change companies,” he says, “and one of the thing that kills productivity is that we have 100% turnover [in truckload]. You can measure it a lot of different ways, but the cost of finding a new driver is somewhere north of five grand a shot.”

Klemp believes sign-on bonuses convey the wrong message. Those fleets are attracting someone who also will leave them for a big bonus, he explains, so it perpetuates turnover.

For better or worse, however, such strategies are going to stay in place for the foreseeable future, instead of significant across-the-board wage hikes for truckers. If wages were significantly pushed up, Klemp believes, many fleets would suddenly find themselves behind the financial eight-ball.

“They are not sitting on some really great freight rates,” he says. Add to this the increased costs of tractor and trailers and high fuel prices, and some operations are “getting killed.”

“Wages are unlikely to rise until we see some real freight rate movement. These guys have got to invest in new equipment, and a lot of that has to do with CSA,” he explains of the Federal Motor Carrier Safety Administration’s new enforcement regime. “If you want to protect your CSA score, one of the ways to do that is to make sure you don't have equipment problems. They are trying to replace equipment as fast they can. It's using up all the cash and credit is remaining very tight.”

So what would it take to see a big overall increase in driver pay? The answer rests with the economy.

“I believe when we see a net deficit of drivers, then we will see the freight rates beginning to rise in a manner that allows carriers to increase rates that allows them to increase wages.”

The problem with the economy right now is that it's essentially at an equilibrium point, he says.

“If the gross domestic product goes over 1% or 2% and we get close to 3% or 4%, we will have a net shortage of drivers very quickly,” Klemp says.

“All this will happen very quickly like it did in 2004 when we woke up and found we couldn't hire driv ers. Then we get people who want us to haul freight, and freight rates and wages take off."

Comments

1.Joe Martin[ May 13, 2013 @ 11:50AM ]

Safety +Proficiency= profits knowledge is the key to higher wages for the driver carrier for example carriers save dramaticly on time of snow chain installation + damage and accidents due to poor chain installation. Ignorance comes at a higher price than education. see truckervideos.com every owner operator that has gained this knowledge is running north now during winter where they avoided it before. Due to supply and demand where rates go up during winter that's smart business

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